March
It is my pleasure to invite you to the Information regarding the matters to be voted upon at the meeting is contained in the formal notice of the meeting and proxy statement on the following pages. It is important that your shares be represented at this meeting. Therefore, please mark, sign, date and return your proxy promptly in the enclosed envelope. A public news release covering voting results will be available after the meeting. The Autoliv, Inc. Annual Report for the fiscal year ended December 31, Sincerely, S. Jay Stewart
The Annual Meeting of Stockholders of Autoliv, Inc. ("Autoliv"or the "Company") will be held on, 1. Reelection of three directors for a term of office expiring on the date of the Annual Meeting of Stockholders in 2. Ratification of the
The close of business on Attendance at the annual meeting will be limited to stockholders of record, beneficial owners of Company common stock entitled to vote at the meeting having evidence of ownership, a maximum of one authorized representative of an absent stockholder, and invited guests of management. Any person claiming to be an authorized representative of a stockholder must, upon request, produce written evidence of such authorization. The meeting will be conducted pursuant to the Company's by-laws and rules of order By order of the Board of Directors March
AUTOLIV, INC. PROXY STATEMENT March SOLICITATION OF PROXIES The shares represented by all properly executed and unrevoked proxies received in proper form in time for the meeting will be voted. Each stockholder is entitled to one vote for each share of common stock held on the Record Date. Shares will be voted in accordance with stockholders' instructions in the accompanying proxy. If no instructions are given, the shares will be voted in accordance with the Board's recommendations, which are noted herein. Any proxy given may be revoked at any time before it is voted at the meeting. Directors will be elected by a plurality of the votes of the shares present at the meeting in person or by proxy and entitled to vote thereon. Votes withheld as to one or more nominees will not be counted as votes cast for such individuals. Any other proposal brought before the meeting will be decided by a majority of votes represented at the meeting and entitled to vote thereat. Consequently, abstentions and broker non-votes (i.e., votes withheld by brokers in the absence of instructions from beneficial holders) will not be counted for purposes of determining whether a proposal has been approved, but will be counted for purposes of establishing a quorum at the meeting. The Company will bear the cost of the solicitation. In addition to solicitation by mail, the Company will request banks, brokers and other custodian nominees and fiduciaries to supply proxy materials to the beneficial owners of the Company's common stock of whom they have knowledge, and will reimburse them for their expenses in so doing. Certain directors, officers and other employees of the Company, not specially employed for the purpose, may solicit proxies, without additional remuneration therefor, by personal interview, mail, telephone or facsimile. In addition, the Company has retained Georgeson Shareholder Communication, Inc. to assist in the solicitation for a fee of 1. ELECTION OF DIRECTORS THE BOARD RECOMMENDS A VOTE "FOR" THE NOMINEES FOR DIRECTORS.
The Board has determined that Messrs. Aronson, Kunerth, Medina, Ringler, Sekiya, Stewart, Stone and Welin qualify as independent directors under applicable rules and regulations. The independent, non-management, directors met without management once in 2002, and will meet at least four times per year in the future. Any interested party who desires to communicate with the non-management directors regarding the Company can do so under the following address: Non-Management Directors Directors who are employees of the Company or any subsidiary thereof do not receive any compensation for service on the Board or Board committees. Non-employee directors receive for their services a retainer of $35,000 per year, plus a fee of $1,200 for each Board meeting attended. The Chairman of the Board receives a retainer of $70,000 per year, plus a fee of $2,400 for each Board meeting attended. In addition, non-employee directors who are chairmen of the Audit and Compensation Committees each receive additional annual retainers of $3,000; and all committee chairmen and members receive $800 except the Chairman of the Board of Directors who receives $1,600 for attendance at each meeting of their particular committees. Non-employee directors who are elected or continuing as such at annual stockholders meetings also receive annual grants of shares of Company common stock with a market value of $15,000 and the Chairman of the board with a value of
Tetsuo Sekiya, Per Welin, INCUMBENT DIRECTORS - TERMS EXPIRING AT THE 2004 ANNUAL MEETING Lars Westerberg, Walter Kunerth, Dionisio Garza Medina, age 49, has been a director of Autoliv since 2002. Mr. Garza serves as Chairman and Chief Executive Officer of ALFA, a Mexican diversified company, since 1994. Prior to 1994 Mr. Garza held several executive positions within the ALFA Group. Mr. Garza is a member of the Boards of Cemex, Vitro, Cydsa and Seguros Commercial América. He is also a member of the Mexican Board of Businessmen, Harvard University Advisory Committee to the David Rockefeller Center for Latin American Studies, Directors of the Associates of the Harvard Business School and a member of the Advisory Committee of the New York Stock Exchange. He holds a Bachelor of Science and a Master degree in Industrial Engineering from the Stanford University and a MBA from the Harvard University Graduates School of Business. INCUMBENT DIRECTORS - TERMS EXPIRING AT THE 2005 ANNUAL MEETING S. Jay Stewart, age 64, has been a director of Autoliv since May 1997. Mr. Stewart was elected by the Board to serve as the Chairman of the Board, effective April 24, 2001. He was Chairman and Chief Executive Officer of Morton International, Inc. from April 1994 through October 1999, and was a director of Morton since 1989. Mr. Stewart was President and Chief Operating Officer of Morton International, Inc. from 1989 through March 1994. In addition, he is a director of Household International, Inc. and of Box USA Corp. Mr. Stewart holds a Bachelor of Science degree in Chemical Engineering from the University of Cincinnati and a M.B.A. from West Virginia University. Roger W. Stone, age 67, has been a director of Autoliv since May 1997 and is Chairman and Chief Executive Officer of Box USA Corp. He served until 1998 as Chairman of the Board (since 1983), President (since 1975), and Chief Executive Officer (since 1979) of Stone Container Corporation, a multinational producer and marketer of pulp, paper and packaging products. Mr. Stone was President and Chief Executive Officer of Smurfit Stone Container Corporation from 1998 to 1999. He was a director of Morton International Inc. from 1989 through 1999 and is a director of McDonald's Corporation. He is a graduate of the University of Pennsylvania's Wharton School of Finance. COMMITTEES OF THE BOARD The Audit Committee The Compensation Committee advises the Board of the Company with respect to the compensation to be paid to the directors of the Company and approves and advises the Board with respect to the terms of contracts to be entered into with the senior executives of the Company. The Committee also administers the Company's cash and stock incentive plan. Members of this committee were Messrs. Stone (Chairman), Aronson, Medina, Ringler, Stewart and Welin. The committee met The Nominating and Corporate Governance Committee
AUDIT COMMITTEE REPORT The Audit Committee reviews the Company's financial reporting process on behalf of the Board of Directors. In fulfilling its responsibilities, the Audit Committee has reviewed and discussed the audited financial statements contained in the The Audit Committee discussed with the independent accountants matters required to be discussed by Statement on Auditing Standards No. 61, "Communication with Audit Committees," as amended. In addition, the Company's independent accountants provided to the Audit Committee the written disclosures required by the Independence Standards Board Standard No. 1, "Independence Discussions with Audit Committees" and the Audit Committee discussed with the independent accountants their independence. In reliance on the reviews and discussions referred to above, the Audit Committee recommended to the Board of Directors (and the Board has approved) that the audited financial statements be included in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, Per Welin, Chairman
As of the date of this proxy statement, The following table shows the Company's common stock beneficially owned as of |
Shares beneficially owned 1) 2) | |
Per-Olof Aronson | |
Wilhelm Kull | |
Walter Kunerth | |
Magnus Lindquist | 20,000 |
Benoit Marsaud | 23,364 |
Dionisio Garza Medina | 0 |
James M. Ringler | 0 |
Tetsuo Sekiya | |
S. Jay Stewart | |
Roger W. Stone | |
Jörgen I. Svensson | |
Per Welin | |
Lars Westerberg | |
All directors, nominees and | |
executive officers as a group 3) |
1) All amounts shown represent less than 1% of the outstanding shares of the Company. COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION EXECUTIVE COMPENSATION
BASE SALARIES ANNUAL BONUS PROGRAMS
In December, 2000, the Committee concluded that the stock options under the Stock Incentive Plan had become unattractive, and therefore the programme did not accomplish its intended purpose of attracting and retaining executive personnel, motivating executive personnel and providing incentive compensation that The RSU's will vest after three years and are conditional upon the optionee not having given notice of termination of employment prior to such date. The RSU's are otherwise subject to the same terms and conditions applicable to the cancelled options under the Stock Incentive Plan.
For
Consequently, the employee incentive compensation programs in which the Company's most highly compensated officers participate have been structured to comply with the Code's definition of performance-based compensation. To qualify as performance-based under the Code, compensation payments must be made pursuant to a plan that is administered by a committee of outside directors and must be based on achieving objective performance goals. In addition, the material terms of the plan must be disclosed to and approved by stockholders, and the Committee must certify that the performance goals were achieved before payments can be awarded. Notwithstanding its general policy, however, the Committee retains the discretion to authorize incentive payments that may not be deductible if it believes that doing so would be in the best interest of the Company and its stockholders.
Roger W. Stone, Chairman
|
Annual Compensation | Long-Term Compensation | |||||||
Name and Principal Function | Fiscal Year | Salary | Bonus | Other Annual Compen- sation | Securities Underlying Options (2) | Restricted Stock Units (4) | ||
Lars Westerberg (3) | 2001 | 484,496 | 130,233 | 0 | 49,000 | 13,500 | ||
Chief Executive | 2000 | 509,868 | 137,001 | 0 | 30,000 | |||
Officer | 1999 | 486,824 | 0 | 0 | 15,000 | |||
Benoit Marsaud | 2001 | 225,564 | 95,694 | 0 | 13,364 | 5,046 | ||
Vice President | 2000 | 204,311 | 120,474 | 0 | 6,900 | |||
Manufacturing | 1999 | 227,221 | 124,035 | 0 | 5,920 | |||
President Autolive France | ||||||||
Hans-Göran Persson | 2001 | 159,884 | 65,116 | 0 | 9,790 | 2,235 | ||
Vice President | 2000 | 172,621 | 43,840 | 0 | 5,450 | |||
Purchasing | 1999 | 181,050 | 0 | 0 | 2,000 | |||
Claes Humbla | 2001 | 155,039 | 38,663 | 0 | 15,318 | 7,977 | ||
Vice President | 2000 | 153,441 | 49,320 | 0 | ||||
Human Resources | 1999 | 156,910 | 46,756 | 0 | ||||
Jörgen I. Svensson | 2001 | 131,298 | 35,000 | 0 | 15,558 | 7,887 | ||
Vice President | 2000 | 134,809 | 49,065 | 0 | ||||
Legal Affairs, | 1999 | 138,805 | 43,651 | 0 | ||||
General Counsel and Secretary |
Annual Compensation | Long-Term Compensation | All Other Compensation | |||||
Name and Principal Function | Fiscal year | Salary | Bonus (3) | Other Annual Compensation | Securities Underlying Options (2) | Restricted Stock Units (4) | (6) |
Lars Westerberg Chief Executive Officer | 2002 2001 2000 | 564,509 484,496 509,868 | 0 130,233 137,001 | 0 0 0 | 50,000 49,000 30,000 | 0 0 13,500 | 370,843 |
Benoit Marsaud Vice President Manufacturing President Autoliv France | 2002 2001 2000 | 250,447 225,564 204,311 | 0 95,694 120,474 | 0 0 0 | 10,000 13,364 6,900 | 0 0 5,046 | |
Magnus Lindquist (5) Chief Financial Officer | 2002 2001 | 210,408 96,900 | 25,600 0 | 0 0 | 10,000 10,000 | 0 0 | 24,180 |
Halvar Jonzon (5) Vice President Purchasing | 2002 2001 | 177,050 13,929 | 5,132 0 | 0 0 0 | 10,000 710 | 0 0 | 26,099 |
Jörgen I. Svensson Vice President Legal Affairs, General Counsel and Secretary | 2002 2001 2000 | 144,720 131,298 134,809 | 0 35,000 49,065 | 0 0 0 | 10,000 15,558 7,270 | 0 0 7,887 | 18,850 |
OPTION GRANTS IN LAST FISCAL YEAR |
Individual Grants | (1) (2) | Expiration | Potential Realizable Value | Individual Grants | (1) | Expiration | Potential Realizable Value | |||||
Number of | % of Total | Exercise | Date | at assumed Annual Rates | Number of | % of Total | Exercise | Date | at assumed Annual Rates | |||
Name and | Securities | Options | or Base | of Stock Price Appreciation | Securities | Options | or Base | of Stock Price Appreciation | ||||
Principal | Underlying | Granted | Price | for Option Term (3) | Underlying | Granted | Price | for Option Term (2) | ||||
Function | Options | to Employees | (per share) | 5% | 10% | Options | to Employees | (per share) | 5% | 10% | ||
Granted | in Fiscal year | Granted | in Fiscal year | |||||||||
Lars Westerberg | 49,000 | 10.3 | $16.99 | June 18, -11 | 523,320 | 1,326,430 | 50,000 | 9.2 | $19.96 | 3/1/12 | 629,000 | 1,587,000 | Chief Executive | Officer |
Benoit Marsaud | 13,364 | 2.8 | $16,99 | June 18, -11 | 142,727 | 361,763 | 10,000 | 1.8 | $19.96 | 3/1/12 | 125,800 | 317,400 | Vice President | Manufacturing |
Hans-Göran Persson | 9,790 | 2.0 | $16,99 | June 18, -11 | 104,557 | 265,015 | ||||||
Halvar Jonzon | 10,000 | 1.8 | $19.96 | 3/1/12 | 125,800 | 317,400 | Vice President | Purchasing | ||||
Claes Humbla | 15,318 | 3.2 | $16,99 | June 18, -11 | 163,596 | 414,658 | ||||||
Vice President | ||||||||||||
Human Resources | ||||||||||||
Magnus Lindquist | 10,000 | 1.8 | $19.96 | 3/1/12 | 125,800 | 317,400 | ||||||
Chief Financial | Chief Financial | |||||||||||
Officer | Officer | |||||||||||
Jörgen I. Svensson | 15,558 | 3.3 | $16,99 | June 18, -11 | 166,159 | 421,155 | 10,000 | 1.8 | $19.96 | 3/1/12 | 125,800 | 317,400 | Vice President | Legal Affairs | General Counsel and Secretary |
(1)
|
Name | Number Of Securities Underlying Unexercised Options At Fiscal Year-End Excercisable/Unexercisable | Value Of Unexercised In-The-Money Options At Fiscal Year-End ($) Exercisable/Unexercisable |
Lars Westerberg | ||
Chief Executive Officer | ||
Benoit Marsaud | ||
Vice President Manufacturing | ||
Vice President Purchasing | ||
Jörgen I. Svensson | ||
Vice President Legal Affairs, General Counsel and Secretary |
*None of the Named Executive Officers exercised any options in EQUITY COMPENSATION PLANS (1) |
(a) | (b) | (c) | |
Plan category | Number of securities to be issued upon exercise of outstanding options, warrants and rights (3) | Weighted-average exercise price of outstanding options, warrants and rights (4) | Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a) |
Equity compensation plans approved by security holders (2) | 1,411,667 | $19.09 | 1,349,897(5) |
Equity compensation plans not approved by security holders | - | - | - |
Total | 1,411,667 | $19.09 | 1,349,897 |
(1) All information as of December 31, 2002. TERMINATION OF EMPLOYMENT AND CHANGE OF CONTROL SEVERANCE AGREEMENTS Senior Executive Officers of the Company have Change of Control Severance Agreements with the Company ("agreements") which were originally effective until December 31, 1998 for PENSION PLANS Senior Executive Officers of the Company other than Mr. Westerberg have the right to retire at the age of
|
Name | Grant Date (1) | Numbers of Securities Underlying Option Repriced or Amended (#) | Market Price of Stock at Time of Repricing or Amendment ($) | Exercise Price at Time of Repricing or Amendment ($) | Number of Options Cancelled (#) | Number of Options Repriced (#) | New Exercise price ($) | Length of Original Option Term Remaining at Date of Repricing or Amendment | Number of Restricted Stock Units Granted (2) (#) |
L .Westerberg | June 18,2001 | 15,000 | 15 | 40.62 | 7,500 | 3,000 | 16,99 | Feb, 09 | 4,500 |
L. Westerberg | June 18,2001 | 30,000 | 15 | 29.37 | 15,000 | 6,000 | 16,99 | Dec, 09 | 9,000 |
B. Marsaud | June 18,2001 | 4,000 | 15 | 31.07 | 2,000 | 800 | 16,99 | Feb 08 | 1,200 |
B. Marsaud | June 18,2001 | 5,920 | 15 | 35.99 | 2,960 | 1,184 | 16,99 | Dec, 08 | 1,776 |
B. Marsaud | June 18,2001 | 6,900 | 15 | 29.37 | 3,450 | 1,380 | 16,99 | Dec, 09 | 2,070 |
H-G. Persson | June 18,2001 | 2,000 | 15 | 30.23 | 1,000 | 400 | 16,99 | July, 09 | 600 |
H-G. Persson | June 18,2001 | 5,450 | 15 | 29.37 | 2,725 | 1,090 | 16,99 | Dec, 09 | 1,635 |
C. Humbla | June 18,2001 | 5,500 | 15 | 35.75 | 2,750 | 1,100 | 16,99 | Aug, 07 | 1,560 |
C. Humbla | June 18,2001 | 7,670 | 15 | 31.07 | 3,835 | 1,534 | 16,99 | Feb, 08 | 2,301 |
C. Humbla | June 18,2001 | 6,150 | 15 | 35.99 | 3,075 | 1,230 | 16,99 | Dec, 08 | 1,845 |
C. Humbla | June 18,2001 | 7,270 | 15 | 29.37 | 3,635 | 1,454 | 16,99 | Dec, 09 | 2,181 |
J. Svensson | June 18,2001 | 5,200 | 15 | 35.75 | 2,600 | 1,040 | 16,99 | Aug, 07 | 1,560 |
J. Svensson | June 18,2001 | 7,670 | 15 | 31.07 | 3,835 | 1,534 | 16,99 | Feb, 08 | 2,301 |
J. Svensson | June 18,2001 | 6,150 | 15 | 35.99 | 3,075 | 1,230 | 16,99 | Dec, 08 | 1,845 |
J. Svensson | June 18,2001 | 7,270 | 15 | 29.37 | 3,635 | 1,454 | 16,99 | Dec, 09 | 2,181 |
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934
In accordance with Ernst & Young AB has been the independent auditing firm for the Company since May 1997. Ernst & Young AB has been the independent auditors for Autoliv AB since 1984. Audit services provided to the Company by Ernst & Young AB during
The Audit Committee has considered the services discussed in the preceding two paragraphs and provided to the Company by Ernst & Young AB and determined that the provision of these services is compatible with maintaining the independence of Ernst & Young AB. The Audit Committee has, however, instructed management to reduce to a minimum services rendered by Ernst & Young AB other than audit services in the future. Representatives of Ernst & Young AB will not be present at the Annual Meeting. THE BOARD RECOMMENDS A VOTE "FOR" THE PROPOSAL TO RATIFY THE APPOINTMENT OF ERNST & YOUNG AB AS THE COMPANY'S INDEPENDENT AUDITORS. 3. DISCRETIONARY VOTING OF PROXIES ON OTHER MATTERS For business to be properly brought before an annual stockholders meeting by a stockholder, timely advance written notice thereof must be received by the Secretary of the Company at its principal executive offices in accordance with the Company's by-laws, a copy of which may be obtained by written request to the Company's Secretary. No such notices were received for the
By Order of the Board
Appendix A Amended and Restated I STATEMENT OF POLICY II ORGANIZATION B Members Director's fees (including any additional amounts paid to chairs of committees and to members of committees of the Board) are the only compensation a member of the Committee may receive from the Company; provided, however, that a member of the Committee may also receive pension or other forms of deferred compensation from the Company for prior service so long as such compensation is not contingent in any way on continued service. No director may serve as a member of the Committee if such director serves on the audit committee of more than two other public companies, unless the Board determines that such simultaneous service would not impair the ability of such director to effectively serve on the Committee. Any such determination must be disclosed in the Company's annual proxy statement. The chairperson and a non-voting Secretary of the Committee shall be designated by the Board, provided that if the Board does not so designate a chairperson, the members of the Committee, by a majority vote, may designate a chairperson. Each member of the Committee must be "financially literate", as such qualification is interpreted by the Board in its business judgment, or must become financially literate within a reasonable period of time after his or her appointment to the Committee. In addition, at least one member of the Committee must have "accounting or related financial management expertise", as the Board interprets such qualification in its business judgement. Further, either (i) at least one member of the Committee must be a "financial expert", as such term is defined in the rules and regulations promulgated by the SEC pursuant to the Act, or (ii) if no member of the Committee is a "financial expert", the Committee shall so inform the Company. Any vacancy on the Committee shall be filled by majority vote of the Board at the next meeting of the Board following the occurrence of the vacancy. No member of the Committee shall be removed except by majority vote of the Board. C Meetings D Agenda, Minutes and Reports E Access to Records, Consultants and Others III DUTIES AND RESPONSIBILITIES OF THE COMMITTEE (a) Select, in its sole discretion (subject to shareholder ratification), the firm of independent auditors to audit the books and accounts of the Company and its subsidiaries for each fiscal year; (b) Review and, in its sole discretion, approve in advance the Company's independent auditors' annual engagement letter, including the proposed fees contained therein, as well as all audit and, all permitted non-audit engagements and relationships between the Company and such auditors (which approval should be made after receiving input from the Company's management). Approval of audit and permitted non-audit services may also be made by the chairperson of the Committee and the person granting such approval shall report such approval to the Committee at the next scheduled meeting; (c) Review the performance of the Company's independent auditors, including the lead partner of the independent auditors, and, in its sole discretion (subject to shareholder ratification), make decisions regarding the replacement or termination of the independent auditors when circumstances warrant; (d) Obtain at least annually from the Company's independent auditors and review a report describing: (i) the independent auditors' internal quality-control procedures; (ii) any material issues raised by the most recent internal quality-control review, or peer review, of the independent auditors, or by any inquiry or investigation by any governmental or professional authority, within the preceding five years, respecting one or more independent audits carried out by the independent auditors, and any steps taken to deal with any such issues; and (iii) all relationships between the independent auditors and the Company (including a description of each category of services provided by the independent auditors to the Company and a list of the fees billed for each such category); The Committee should present its conclusions with respect to the above matters, as well as its review of the lead partner of the independent auditors, and its views on whether there should be a regular rotation of the independent auditors, to the Board. (e) Oversee the independence of the Company's independent auditors by, among other things: (i) actively engaging in a dialogue with the independent auditors with respect to any disclosed relationships or services that may impact the objectivity and independence of the independent auditors, and taking appropriate action to satisfy itself of the auditors' independence; (ii) ensuring that the lead audit partner and reviewing audit partner responsible for the audit of the Corporation's financials statements have not performed audit services for the Company for more than the previous five consecutive fiscal years of the Corporation; (iii) ensuring that the chief executive officer, controller, chief financial officer, chief accounting officer or other person serving in an equivalent position of the Corporation, was not, within one year prior to the initiation of the audit, an employee of the independent auditor who participated in any capacity in the Corporation's audit; and (iv) considering whether there should be a regular rotation of the Corporation's independent auditors; (f) Instruct the Corporation's independent auditors that they are ultimately accountable to the Committee and the Board, and that the Committee is responsible for the selection (subject to shareholder ratification), evaluation and termination of the Corporation's independent auditors; (g) Review and accept, if appropriate, the annual audit plan of the Corporation's independent auditors, including the scope of audit activities and all critical accounting policies and practices to be used, and monitor such plan's progress and results during the year; (h) Review the results of the year-end audit of the Corporation, including any comments or recommendations of the Corporation's independent auditors; (i) Review with management, the Corporation's independent auditors and, if appropriate, the director of the Corporation's internal auditing department, the following: (i) the Corporation's annual audited financial statements and quarterly financial statements, including the Corporation's disclosures under "Management's Discussion and Analysis of Financial Condition and Results of Operations", and any major issues related thereto; (ii) critical accounting policies and such other accounting policies of the Corporation as are deemed appropriate for review by the Committee prior to any interim or year-end filings with the SEC or other regulatory body, including any financial reporting issues which could have a material impact on the Company's financial statements; (iii) major issues regarding accounting principles and financial statements presentations, including (A) any significant changes in the Company's selection or application of accounting principles and (B) any analyses prepared by management and/or the independent auditors setting forth significant financial reporting issues and judgements made in connection with the preparation of the financial statements, including analyses of the ramifications and effects of alternative generally accepted accounting principles methods on the Company's financial statements; (iv) all alternative treatments of financial information that have been discussed by the independent auditors and management, ramifications of the use of such alternative disclosures and treatments, and the treatment preferred by the auditors; (v) all other material written communications between the independent auditors and management, such as any management letter or schedule of unadjusted differences; and (vi) the effect of regulatory and accounting initiatives, as well as off-balance sheet structures, on the financial statements of the Company; (j) Review with the chief executive officer and chief financial officer and independent auditors, periodically, the following: (i) all significant deficiencies in the design or operation of internal controls which could adversely affect the Company's ability to record, process, summarize, and report financial data, including any material weaknesses in internal controls identified by the Company's independent auditors; (ii) any fraud, whether or not material, that involves management or other employees who have a significant role in the Company's internal controls; and (iii) any significant changes in internal controls or in other factors that could significantly affect internal controls, including any corrective actions with regard to significant deficiencies and material weaknesses. (k) Attempt to resolve all disagreements between the Company's independent auditors and management regarding financial reporting; (i) any accounting adjustments that were noted or proposed by the independent auditors but were rejected by management (as immaterial or otherwise); (ii) any communications between the audit team and the independent auditor's national office respecting auditing or accounting issues presented by the engagement; and (iii) any "management" or "internal control" letter issued, or proposed to be issued, by the independent auditors to the Company; (m) Confirm that the Company's interim financial statements included in Quarterly Reports on Form 10-Q have been reviewed by the Company's independent auditors; (n) Review: (i) the adequacy and effectiveness of the Company's accounting and internal control policies and procedures on a regular basis, including the responsibilities, budget and staffing of the Company's internal audit function, through inquiry and discussions with the Company's independent auditors and management of the Company; and (ii) the yearly report prepared by management, and attested to by the Company's independent auditors, assessing the effectiveness of the Company's internal control structure and procedures for financial reporting and stating management's responsibility to establish and maintain such structure and procedures, prior to its inclusion in the Company's annual report; (o) Review with management the Company's administrative, operational and accounting internal controls, including any special audit steps adopted in light of the discovery of material control deficiencies, and evaluate whether the Company is operating in accordance with its prescribed policies, procedures and codes of conduct; (p) Receive periodic reports from the Company's independent auditors and management of the Company to assess the impact on the Company of significant accounting or financial reporting developments that may have a bearing on the Company; (q) Establish and maintain free and open means of communication between and among the Board, the Committee, the Company's independent auditors, the Company's internal auditing department and management, including providing such parties with appropriate opportunities to meet separately and privately with the Committee on a periodic basis; (r) Review the Company's earnings press releases (especially the use of "pro forma" or "adjusted" information not prepared in compliance with generally accepted accounting principles), as well as financial information and earnings guidance provided by the Company to analysts and rating agencies (which review may be done generally (i.e., discussion of the types of information to be disclosed and type of presentations to be made), and the Committee need not discuss in advance each earnings release or each instance in which the Company may provide earnings guidance); (s) Establish clear hiring policies by the Company for employees or former employees of the Company's independent auditors; (t) Discuss guidelines and policies governing the process by which senior management of the Company and the relevant departments of the Company assess and manage the Company's exposure to risk, as well as the Company's major financial risk exposures and the steps management has taken to monitor and control such exposures; u) Meet at least annually with the general counsel, and outside counsel when appropriate, to review legal and regulatory matters, including any matters that may have a material impact on the financial statements of the Company; (v) Prepare the report required by the rules of the SEC to be included in the Company's annual proxy statement; (w) Review the Company's policies relating to the avoidance of conflicts of interest and review past or proposed transactions between the Company and members of management as well as policies and procedures with respect to officers' expense accounts and perquisites, including the use of corporate assets. The Committee shall consider the results of any review of these policies and procedures by the Company's independent auditors; (x) Review the Company's program to monitor compliance with the Company's Code of Conduct, and meet periodically with the Company's Compliance Officer to discuss compliance with the Code of Conduct; (y) Obtain from the Company's independent auditors any information pursuant to Section 10A of the Securities Exchange Act of 1934; (z) Establish procedures for (i) the receipt, retention and treatment of complaints received by the Company regarding accounting, internal accounting controls or auditing matters, and (ii) the confidential, anonymous submission by employees of the Company of concerns regarding questionable accounting or auditing matters; (aa) Secure independent expert advice to the extent the Committee determines it to be appropriate, including retaining, with or without Board approval, independent counsel, accountants, consultants or others, to assist the Committee in fulfilling its duties and responsibilities, the cost of such independent expert advisors to be borne by the Company; (bb) Report regularly to the Board on its activities, as appropriate. In connection therewith, the Committee should review with the Board any issues that arise with respect to the quality or integrity of the Company's financial statements, the Company's compliance with legal or regulatory requirements, the performance and independence of the Company's independent auditors, or the performance of the internal audit function; (cc) Prepare and review with the Board an annual performance evaluation of the Committee, which evaluation must compare the performance of the Committee with the requirements of this charter, and set forth the goals and objectives of the Committee for the upcoming year. The evaluation should include a review and assessment of the adequacy of the Committee's charter. The performance evaluation by the Committee shall be conducted in such manner as the Committee deems appropriate. The report to the Board may take the form of an oral report by the chairperson of the Committee or any other member of the Committee designated by the Committee to make this report; (dd) Perform such additional activities, and consider such other matters, within the scope of its responsibili-ties, as the Committee or the Board deems necessary or appropriate. * * * While the Committee has the duties and responsibilities set forth in this charter, the Committee is not responsible for planning or conducting the audit or for determining whether the Company's financial statements are complete and accurate and are in accordance with generally accepted accounting principles. In fulfilling their responsibilities hereunder, it is recognized that members of the Committee are not full-time employees of the Company, it is not the duty or responsibility of the Committee or its members to conduct "field work" or other types of auditing or accounting reviews or procedures or to set auditor independence standards, and each member of the Committee shall be entitled to rely on (i) the integrity of those persons and organizations within and outside the Company from which it receives information, (ii) the accuracy of the financial and other information provided to the Committee absent actual knowledge to the contrary (which shall be promptly reported to the Board) and (iii) statements made by management or third parties as to any information technology, internal audit and other non- audit services provided by the auditors to the Company. ************* |